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States Begin to Cut Health Insurance Programs in the Face of Huge Deficits

Source: NY Times

Posted on 02 Mar 2011

Nearly all of the about 41,500 Pennsylvanians who were covered by adultBasic, a state-subsidized insurance program for the working poor, no longer have health coverage after Governor Tom Corbett closed down the program this past Monday, indicating that the program he inherited is not sustainable as the state faces a $4 billion budget shortfall. He puts the blame squarely on his predecessor, Edward G. Rendell, a Democrat, for not keeping the plan solvent. Beneficiaries of the program were notified in late January that their coverage would expire Feb. 28.

Corbett is not the only governor who has had to take such measures as states are facing huge deficits. Governor Christine Gregoire of Washington, a Democrat, recently removed 17,500 adults covered under Basic Health, a state-financed plan for the working poor. In Arizona, Gov. Jan Brewer, a Republican, proposes to remove up to 250,000 childless adults who have been insured by her state’s Medicaid program under a decade-long agreement with the federal government.

Medicaid, which is financed jointly by state and federal governments, primarily covers low-income children, parents and the disabled. Most states do not now offer coverage to childless adults, but starting in 2014, the new federal health care law will require them to expand Medicaid to insure adults earning up to 133 percent of the poverty level.

Former Gov. Tom Ridge, a Republican, started Pennsylvania’s adultBasic program in 2001 to cover those who earned too much to qualify for Medicaid but too little to afford private insurance. Originally supported with national tobacco litigation proceeds, the policies were made available to adults who earned up to twice the federal poverty level (which would be $21,780 this year).

When the tobacco money started to dwindle, Mr. Rendell negotiated a deal with the state’s four nonprofit Blue Cross/Blue Shield insurers, which had been accumulating large surpluses. The Blues agreed to contribute to the plan to show they were fulfilling the charitable obligation that accompanies their tax-exempt status. The agreement expired on Dec. 31.

Over six years, the Blues provided $542.7 million to the plan, and $356.5 million more to other state health programs. They agreed last year to add $51 million to help maintain coverage through the fiscal year, which ends in June. It was not nearly enough. The program’s revenue streams have never met more than a fraction of its demand, which has soared in the economic downturn. When the program closed, 505,000 people were on its waiting list, nearly seven times as many as in early 2007.

In an interview, Kevin Harley, a spokesman for Governor Corbett, called the program’s closing “unfortunate,” and then quickly blamed Mr. Rendell. He said the former governor had pledged to find $56 million to sustain the plan as part of last year’s deal with the Blues, but never did. Donna Cooper, who was Mr. Rendell’s secretary of policy and planning, and the senior official in those negotiations, called Mr. Harley’s assertion “just wild.”

“That is patently untrue,” said Ms. Cooper, now a senior fellow at the Center for American Progress. “That commitment was never made.”

Mr. Corbett met with the Blue Cross plans, but did not persuade them to make additional contributions. “My understanding is that the Blues were not willing to continue,” Mr. Harley said. “They fulfilled all their obligations under the law.”

The Obama administration rejected the state’s request to allow refugees from adultBasic to qualify immediately for the high-risk insurance pool authorized under the federal health law. Kathleen Sebelius, the secretary of health and human services, responded that she could not waive the law’s requirement that applicants be uninsured for six months.

In Harrisburg, the state capital, Democratic legislators proposed to keep the program alive by seeking $25 million each from the Blues and the state, and by nearly doubling premiums. The Republicans, who control both houses of the General Assembly, have expressed no support.

“At the end of the day, the Blues are not willing to do it,” said Senator Jay Costa Jr., the minority leader, “and the administration is not willing to put the strong arm on them to get them to participate in the way that Governor Rendell did.”

The Blue Cross/Blue Shield plans continue to run substantial surpluses, rising to a cumulative $5.6 billion in 2009 from $3.5 billion in 2002, according to the Pennsylvania Budget and Policy Center, a research group that advocates for low-income families.

But the insurers say their obligation to pay for a state program has ended. “Our support to adultBasic was always a temporary financing mechanism,” said Aaron Billger, a spokesman for Highmark Blue Cross Blue Shield, the largest of the state’s plans. “We have long told the state that it was unsustainable.”